{% include "includes/auth/janrain/signIn_traditional.html" with message='It looks like you are already verified. If you still have trouble signing in, you probably need a new confirmation link email.' %}

What are German bonds?

What are German bonds?

The bonds that Russell Erxleben said he has bought and sold were first sold in the United States on behalf of the German government from 1924 to 1930 to raise money to pay reparations demanded by the Allied victors of World War I.

The majority are called either Dawes or Young bonds, sold in U.S. dollar denominations in New York and deemed bearer instruments — payable in gold to the person possessing them. Sales of the Dawes and Young bonds raised

$210 million for the struggling German government.

When Adolf Hitler rose to power in 1933, the Germans stopped paying interest on the bonds. According to a 1957 U.S. court ruling, Germany began repurchasing the defaulted bonds before World War II. At the close of the war, Russian soldiers stole the reacquired bonds from German banks, the court case said.

Because of this alleged looting, Germany has maintained that many of the bonds that were in circulation after World War II are not redeemable. In 1953, Germany agreed to redeem some bonds at face value with no interest if holders could demonstrate that their bonds were authentic and not among those stolen.

It is unclear how big the market is today for the bonds. They are commonly listed for sale on auction websites and financial message boards.

Some collectors seek out the bonds for their historical value. A Lansing, Mich.-based brokerage firm came under scrutiny by the Securities and Exchange Commission for selling the bonds in the late 1990s. The SEC never took action against the sales, according to the managing partner of that brokerage, who said he no longer sells the bonds and hasn't for years.

Today, a contingent of people who have acquired the pre-World War II German bonds claims that the German government and the financial institutions that handled the bonds owe billions of dollars to the current holders.

Some of them say the story of looting by Russian soldiers was fabricated to escape paying.

A series of legal cases filed by bondholders hoping to collect are ongoing in U.S. courts. One case filed in Miami by World Holdings Inc., a Florida company that owns bonds, is on appeal after a judge ruled that the Republic of Germany is not immune from the suit. In another suit, pending in Chicago, a plaintiffs' lawyer has asked the judge to certify it as a class action.

Mohammed A. Abbas, an Antwerp, Belgium-based lawyer who filed the Chicago lawsuit on behalf of two Chicago residents and a resident of Belgium, said the suits are being prosecuted in the United States because the bonds were sold here and are payable here.

Abbas said that the suits could take years to decide but that he is confident he will be successful. Given the increase in the value of gold over the years and compound interest, the bonds will be worth a fortune, he said.

"I think Germany has been very clever in terms of sweeping the issue under the rug," Abbas said. "These bonds are still their obligation, and they have a lot of value."